Kicevo is a town of 30,000 inhabitants in the west of Macedonia. Ethnic Macedonians make up the majority of the population with 53.5 percent, while Albanians constitute a significant minority of 30.5 percent (2002 Census). Despite its ethnic mix, the town remained peaceful during the 2001 conflict, building on decades of peaceful co-existence. The different socio-economic histories of the two ethnic groups in Kicevo, however, give a good deal of insight into the underlying structural factors behind the armed conflict in 2001.

Under Yugoslav socialism the authorities consciously pursued a policy of promoting urbanisation and the creation of industrial centres. The little town of Kicevo saw its population explode, as workers migrated from rural areas in search of jobs in the new socialist industrial enterprises. The town also gained a number of public institutions, including branches of ministries, public utility companies, schools, and a 4,000-strong Yugoslav army barracks. These provided additional employment opportunities for educated Macedonians.

The Albanians of the region – looked down on by middle-class ethnic Macedonians for their relative lack of education – were largely excluded from jobs in both industry and the public sector. Most Albanians in Kicevo and the surrounding villages completed no more than primary education. Since Macedonian dominated as the language of instruction in secondary and tertiary education, they were at a natural disadvantage.

With the route to formal employment largely closed off, many ethnic Albanians migrated in search of better prospects abroad. The remittances sent by these migrants became an important source of income for Albanian families in Kicevo. Conservative estimates of remittances sent in 2002 to the Kicevo area put the figure at € 16 million per year – more than the combined salaries of ethnic Macedonians employed in socially owned enterprises and the public sector.

Migrants also contribute economically by returning in the summer months, boosting the revenue of small Albanian businesses. Many come back to get married, a phenomenon that has caused reception halls and shops selling wedding gowns to spring up all over the Albanian quarter.

The collapse of Socialist Yugoslavia exposed Kicevo's industries to a new economic environment, in which only a few could keep afloat. Economic transition brought about a painful process of deindustrialisation. Of 6,600 jobs in socialist enterprises in 1989, only half remained by 2002. A further 465 jobs had been lost by 2006. With some companies threatened by bankruptcy and many overstaffed and inefficient, this process is likely to continue. The development of the private sector, a key element of transition, has not really taken place. Between 2002 and 2005 a small construction company was the only production company with more than 10 workers to be launched in Kicevo. Those that had existed prior to 2002 were all experiencing financial difficulties three years later.

Ethnic Macedonians are the hardest hit by Kicevo's deindustrialisation. Albanians had for the most part been excluded from such jobs and came to be economically dependent on remittances from abroad rather than official employment at home. Ethnic Macedonians seem to have been unable to take this route, partly due to the lack of a Macedonian community abroad that would have facilitated emigration. The decline of industry has left middle class families in Kicevo with only one alternative – employment in the public sector. It is precisely for this reason that the Ohrid Agreement’s provisions on "equitable representation" in the public sector have become so sensitive an issue among Kicevo's ethnic communities.

In 2001, when the Ohrid Agreement was signed, Albanians were still vastly underrepresented in Kicevo's state administration. Leaving aside education, which was ethnically balanced for reasons of language, only about 15 percent of jobs in the Kicevo area were held by Albanians (though Albanians comprised 50 percent of the local population). In the town of Kicevo the figure was less than 10 percent. Redressing this imbalance by increasing public sector employment – which might have already been too high as it were – was impossible due to public-finance constraints. Public sector jobs for Albanians thus had to come at the cost of the already beleaguered ethnic Macedonian community.

In some respects, Kicevo can be seen as a success story. In the years since the Ohrid agreement was signed, the share of Albanians in the state administration has significantly increased. In 2002 there were three Albanians in important administrative positions in Kicevo; by autumn 2005 there were over 20. Even as overall employment declined, the number of Albanians on the payroll of the police force, the hospital, and the local schools increased. Inasmuch as they hurt the economic prospects for the ethnic Macedonian community, the changes did not provoke a major public outcry.

Nevertheless, the economic outlook for Kicevo remains bleak. The slow demise of socialist industries has not been offset by a new, dynamic private sector. Emigration, traditionally a valve for large scale unemployment and a source of income, has become more difficult due to the EU's immigration policies. Remittances from the Albanian community living abroad have generally not led to productive investments in the area. Only when Kicevo's ethnic groups share in the development of new prospects, rather than grumble over the division of scraps from its socialist inheritance, will the structural causes of conflict be resolved.